Passage of Prop 30 prompts new predictions of recovery

Receive the latest prop-zero updates in your inbox

When is a prediction of a $1.9 billion shortfall actually considered good news?

In deficit-battered, recession-weary California, that's the case.

It sounds strange, until you consider that it sounds a whole lot better than the staggering $41 billion deficit projected at the end of 2008 -- and much better than the $25 billion hole that the state's Legislative Analyst was forecasting in 2010. And much more rosy than the $16 billion shortfall Gov. Jerry Brown was projecting just last spring.

On Wednesday, the Analyst's office -- respected for its nonpartisanship -- said its $1.9 billion deficit estimate covers the next year-and-a-half. The report cast the state's recovering finances in a favorable light, thanks to earlier budget cuts and the voter approval of Proposition 30.

"The additional, temporary taxes provided by Proposition 30 have combined to bring California a promising moment: the possible end of a decade of acute state budget challenges," the LAO report said.

In fact, the report floated the possibility of the state actually running a surplus of up to a billion dollars by 2014.

But no one should break out the champagne just yet.

First, use of the term "surplus" gives the state's budget-writers heartburn, since revenues fluctuate all the time.

Second, and more importantly, this glimpse of a recovery depends to an enormous degree on Gov. Brown's ability to hold the line on new spending. After years of cuts, there's a lot of pent-up demand. Everyone will have their hand out.

The last time this happened, during the dot-com boom a dozen years ago, the state spent heavily on programs including schools; reducing class size and emphasizing teacher accountability. When the bottom fell out, the spending was unsustainable.

With Democrats sewing up a super-majority in the legislature, there are no Republican hold-outs to block spending increases. Even Gov. Brown, who has vowed to exercise restraint, could find himself outflanked if Democrats show enough unity to override a veto.

The Legislative Analyst's projections of a surplus are welcome news to a Capitol weary of budget strife and stalemates. But they are likely to lead to a different kind of conflict in 2013, a budgetary civil war between Brown and his fellow Democrats.

Published at 11:42 AM PDT on Nov 17, 2012

Author Kevin Riggs, an Emmy-winning former TV reporter in Sacramento, is Senior Vice President at Randle Communications.